GBPUSD Rallies on Strong UK Retail Sales as Brexit Talks Resume

GBPUSD PRICE, NEWS AND ANALYSIS:

• UK retail sales jumped in July, with the year/year rate up to 3.5% from 2.9% in June.
• GBPUSD has steadied in recent days but a strong rally is unlikely as Brexit talks between the EU and the UK resume today in Brussels.

GBPUSD LIFTED BY UK RETAIL SALES

UK retail sales growth rose to 3.5% year/year in July, up from 2.9% the month before. That has helped GBPUSD, which was already showing signs of stabilizing after its recent sharp falls. However, a strong rally is unlikely as the prospect of a no-deal Brexit continues to worry traders ahead of new EU-UK Brexit negotiations in Brussels today.

A breakthrough is not expected at the talks, which are taking place ahead of a meeting of EU heads of state and government in Salzburg next month. That, in turn, will precede an EU summit in October, penciled in as the time to reach a deal, although that deadline is likely to slip to later in the year.

Against this background a stronger recovery in GBPUSD is unlikely.

GBPUSD PRICE CHART, FIVE-MINUTE TIMEFRAME (AUGUST 16, 2018)

The UK retail sales data for July showed headline sales up 3.5% year/year – above both June’s 2.9% and the predicted 3.0%. Excluding fuel, sales rose 3.7% - above the predicted 2.8% and the previous 2.9%. Looking at the 3m/3m data, the headline rise was the largest since February 2015, while the ex-fuel number was the strongest since March 2004.

According to the Office for National Statistics, clothing sales may have been boosted by extended discounting while the World Cup and sunny weather may have lifted food sales.

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